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Nigeria, Others to Account for 53% of Fossil Fuel

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Oil Prices - Investors King
  • Nigeria, Others to Account for 53% of Fossil Fuel

Nigeria and other countries will account for 53 per cent of fossil fuel in use by 2040, Seplat Petroleum Development Company Plc Chief Executive Officer, Mr Austin Avuru, has said.

Fossil fuel, also known as hydrocarbon fuel is derived from oil and natural gas, is found in Nigeria, Ghana, South Africa, Algeria, Britain, United States, Germany, Canada and other countries of the world.

He spoke at a session at a workshop hosted by Petroleum Technology Association of Nigerian (PETAN) at the Offshore Technology Conference (OTC) in Houston Texas, United States. The workshop had “Global Energy Transformation – The Effect and Future of the African Oil Industry and Economy” as theme.

“Even up to 2040, fossil fuel will account for 53 per cent of the world energy demand. So, what we are seeing today is a gradual decline in the total contribution of fossil fuel to the energy mix over time. It is not an overnight elimination of fossil fuel,” he said.

Avuru noted that the global trend in energy supply would seem to suggest alarming. “The impression is generally given that the world is fighting a spirited battle to make sure that fossil fuel becomes irrelevant; and in that context, for countries like Nigeria that are endowed with fossil fuel, some people seem to be saying Nigeria is going to wake up one day and find out there is no use for its crude oil and natural gas.

“This impression also suggests that Nigeria will become a worthless country because its fossil fuel endowment will become completely useless to the world.”

As we move beyond 2030, 2040 and 2050, the energy mix will continue to be guided by availability, commercial consideration; which means, even for fossil fuel, countries will pay attention to cost because fossil fuel will have to compete the same way renewable will be able to compete,”Avuru said.

He explained that fossil fuel was always known to be a finite resource, which means that the world, even over the last 100 years, knew that it will come to a point where there will be a decline in the supply of fossil fuel as energy source.

“Those days in the 70s, there was a prediction by the International Energy Agency (IEA) that between 2012 and 2015 we would get to peak oil. Peak oil means that beyond that point, we will begin to see a decline in the world production. Thanks to technology. That date has been shifted forward. Peak oil will come. We have only shifted it forward because of technology.”

Today technology has enabled us to get crude oil and natural gas out of shale. Those of us who are geologists have always known that, there was crude oil in shale, but shale didn’t have the permeability to release it. What technology has done through cracking is to induce that permeability to release the crude oil and natural gas from shale. Thanks to technology because we have seen additional sources of crude oil and natural gas that moved backwards the date for peak oil.

“So, what we are seeing today is a very sensible scientific move by the world and by the advanced technologies of the world to start developing that alternative to fossil fuel because the day will come when there will be no fossil fuel,” he said.

Avuru indicated that fossil fuel which is, natural gas and crude which accounted for all our energy needs 20 years ago, has now declined to a level where renewable now accounts for 20 per cent of our energy needs.

He said energy needs keep increasing by three per cent on yearly. “If that 20 per cent accounted for by renewable energy were not there today, the demand for crude oil and natural gas would have driven the cost of crude oil to about $200 per barrel,” he said.

He continued: “Invariably, what we are seeing is a gradual transformation that should not be seen as a curse, but as solution that is being provided to the world that by the time we get to the point of decline in the supply of fossil fuel, there will be alternatives to fill the vacuum.”

When we see the demand for energy versus the supply, if we do nothing about oil and gas, we will see that the gap over a 20-year period will lead to a catastrophe. So, the point I am making and the point to take home is that there is no gang up by the world to make fossil fuel irrelevant. What the world is doing is to start in a timely fashion to develop the alternatives that must come when fossil fuel delivery in the world energy mix starts to decline.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Dangote Refinery Struggles Amid Alleged IOC Sabotage, Calls for Government Support

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Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited (DIL), has accused International Oil Companies (IOCs) in Nigeria of undermining the operations of Dangote Oil Refinery and Petrochemicals.

Edwin claims that these IOCs are deliberately obstructing the refinery’s efforts to purchase local crude oil by inflating prices above market rates, compelling the refinery to import crude from as far afield as the United States at significant additional costs.

Speaking at a one-day training programme for Energy Editors organized by the Dangote Group, Edwin expressed his frustration over the challenges faced by the refinery.

“While the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is trying their best to allocate crude to us, the IOCs are deliberately frustrating our efforts to buy local crude. They are either asking for an excessive premium or claiming crude is unavailable. At one point, we paid $6 above the market price, forcing us to reduce output and import crude, increasing our production costs,” Edwin lamented.

The refinery, which began production recently, has exported over 3.5 billion liters of fuel, representing 90% of its output.

However, Edwin warned that the IOCs seem intent on ensuring that Nigeria remains dependent on imported refined petroleum products by exporting raw materials to their home countries and re-importing the refined products, thereby creating employment and wealth abroad while Nigeria grapples with unemployment and economic challenges.

Edwin also criticized the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) for indiscriminately issuing licenses to importers, leading to an influx of substandard, high-sulfur diesel and other refined products into Nigeria.

“Despite our compliance with ECOWAS regulations and standards, dirty diesel from Russia is being dumped into the Nigerian market. This has serious health implications for Nigerians,” he stated.

In recent months, reports from Agence-France Presse highlighted the detrimental impact of these imports, with high-sulfur fuels linked to carcinogenic effects.

European countries like Belgium and the Netherlands have already banned the export of such fuels to West Africa, citing their harmful impact on air quality and public health.

Edwin urged the Nigerian government and regulators to provide necessary support to ensure the refinery’s success.

“The Federal Government issued 25 licenses to build refineries, and we are the only one that delivered on our promise. We deserve every support from the government to create jobs and prosperity for the nation,” he asserted.

He also appealed to the National Assembly to expedite the implementation of the Petroleum Industry Act (PIA) to safeguard Nigeria’s interests and ensure that the country’s refining capacity is fully utilized.

“Ghana has banned the importation of highly contaminated diesel and petrol into their country through legislation. It is regrettable that, in Nigeria, import licenses are granted despite knowing that we have the capacity to produce nearly double the amount of products needed domestically and export the surplus,” Edwin concluded.

The Dangote Refinery’s predicament underscores the broader challenges facing Nigeria’s energy sector, where regulatory and market dynamics continue to pose significant hurdles for local enterprises striving to boost domestic production and reduce dependence on imports.

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Experts Predict Nigeria’s Free Trade Zones Could Generate More Than N11.11tn

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Economic experts are optimistic about the potential of Nigeria’s Free Trade Zones (FTZs) to boost the nation’s economy significantly.

According to recent analysis, these zones could generate more than the N11.11 trillion they have already remitted to the Federation Account as of October 2023.

The Director of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, said the FTZs will help facilitate forex.

“Nigeria’s urgent need for foreign exchange necessitates leveraging our free zones to enhance non-oil export revenue and reduce dependency on crude oil earnings,” Yusuf stated.

He pointed out the success stories of other countries, notably Dubai, which has effectively utilized its free zones to generate foreign exchange and attract significant investments.

“Our free zones must strive to do more, as we are still heavily reliant on oil and gas for our foreign exchange earnings. Increased investment in these areas is crucial,” he added.

Supporting this perspective, the Managing Director of the Nigeria Export Processing Zones Authority (NEPZA), Olufemi Ogunyemi, recently highlighted the economic contributions of the FTZs while addressing the Senate Committee on Industry, Trade, and Investment.

Ogunyemi noted that these zones have created substantial wealth for the states hosting them and generated significant revenue for various agencies.

“Agencies such as the Nigeria Customs Service, the Immigration Services, and the Nigerian Ports Authority have seen revenues of N59.38 billion, N828.7 million, and N8.738 billion, respectively, while states have received N998 million in Pay As You Earn (PAYE) remittances,” Ogunyemi reported.

He also highlighted the broader impact of the FTZs, noting that as of the end of 2023, the 46 licensed zones had provided 38,429 direct jobs and an additional 172,930 indirect jobs.

Foreign direct investment (FDI) worth $491.8 million and local direct investment amounting to N1.15 trillion have flowed into these zones, with N1.62 trillion worth of cargo imported from 2019 to 2023, saving scarce foreign exchange.

David Adonri, Vice President of Highcap Securities Limited, praised NEPZA’s achievements, suggesting that the government use these successes to encourage more Nigerians to start manufacturing businesses within the FTZs.

“The remittances from the free trade zones are commendable and should be a marketing tool to attract more investments,” Adonri said.

However, some experts believe there is room for improvement. Professor Olusegun Ajibola of Babcock University argued that while the remittances are noteworthy, they are not yet at a level worth celebrating.

“The government needs to intensify efforts in revenue generation from these zones as they were established at a significant cost to the host states,” Ajibola remarked.

He called for a review of the 32-year-old NEPZA Act to address any challenges and enhance the performance of the FTZs.

As Nigeria continues to seek ways to diversify its economy and reduce reliance on oil, the FTZs present a promising avenue. With strategic investments and robust management, these zones could indeed surpass their current contributions, fostering economic growth and stability for the nation.

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Nigeria’s Dangote Refinery Breaks Into Asian Market with LSSR Shipment

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In a historic move, Dangote Refinery is set to ship low-sulfur straight-run fuel oil (LSSR) from Nigeria to Singapore this week, its entry into the Asian market.

This development represents a significant milestone for the refinery, which began operations in January following a $20 billion investment.

According to ship tracking data and market sources, the refinery will initiate a new trade route from Nigeria to Asia, a region that consistently demands low-sulfur fuel oil for ship refueling at Singapore, the world’s largest bunker hub.

The Glencore-chartered vessel, Front Brage, will deliver approximately 124,000 metric tons (787,400 barrels) of LSSR to Singapore, with the shipment expected to arrive on Wednesday.

The Dangote Refinery, with a processing capacity of up to 650,000 barrels of products per day, is poised to become the largest refinery in Africa and Europe once it reaches full capacity.

Since March, the refinery has increased its LSSR exports, primarily sending cargoes to the Americas and Europe, as reported by ship tracking data from Kpler and Vortexa.

“This first shipment to Asia marks a new chapter in Dangote Refinery’s expansion strategy,” said a market analyst. “Breaking into the Asian market underscores the refinery’s growing influence and its capability to meet diverse global fuel demands.”

Market sources suggest that the cargo was redirected to Asia due to weaker demand in Europe. Data from LSEG indicates that the east-west spread for front-month 0.5 percent LSFO, reflecting the price difference between these regions, stayed above $40 per ton this week.

Dangote’s LSSR cargoes are priced against Rotterdam’s 0.5 percent LSFO quotes on a free-on-board basis, although the specific pricing differential for this shipment was not disclosed by market sources.

This pioneering shipment is the beginning of a series of exports to Asia. Another LSSR shipment from the Dangote refinery, containing around 157,000 tons, is expected to reach Singapore in July aboard the vessel Stena Suede, based on ship tracking data.

LSSR is typically blended with other fuels to create low-sulfur fuel oil (LSFO) for bunkering or used as feedstock in various refinery processes.

This export initiative not only diversifies Dangote Refinery’s market reach but also enhances Nigeria’s position in the global energy market.

In February, Dangote began exporting oil products and started purchasing crude oil, mainly from the Nigerian National Petroleum Company (NNPC) Ltd, in December 2023.

The refinery’s successful entry into the Asian market is anticipated to drive further growth and establish new trade relationships, reinforcing its status as a key player in the global oil industry.

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This landmark export not only demonstrates Dangote Refinery’s operational capabilities but also signals Nigeria’s expanding influence in the global energy sector. As the refinery continues to innovate and expand, it is well-positioned to meet the increasing global demand for cleaner, more efficient fuels.

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